SUMMARY OF SIGNIFICANT CTA CASES (October 13 - November 2009)

By: Bryan Joseph L. Mallillin

1. The inherent power of the state to impose taxes includes the power to grant tax
exemptions, which is granted either by the Constitution or by an act of the legislature,
subject to limitations the Constitution may provide. Furthermore, a law cannot be deemed
repealed unless it is clearly manifest that the Legislature intended it.
In this case, the petitioner is seeking exemption from VAT. The tax exemption being availed of by
petitioner Semirara Mining Corp. is a tax exemption granted by an act of legislature, which is P.D.
972. Under Section 16 of said law, operators of coal mining contracts are given various incentives,
which include exemption from all taxes except income tax. Furthermore, the said incentive or tax
exemption was embodied and incorporated in Section 5.2 of the Coal Operating Contract between
petitioner and the Philippine Government.
As provided under Section 21 of the 1997 Tax Code, VAT is one of the national internal revenue
taxes, hence, exemption from VAT falls within the exemptions provided by P.D. 972 and its Coal
Operating Contract. Furthermore, petitioners claim for exemption from the payment of VAT is
also covered by the 1997 Tax Code notwithstanding its amendment by R.A. 9337, as provided by
Section 109(k). There is no express repeal since there is no express mention of P.D. 972 in the
repealing clause of R.A. 9337. Semirara Mining Corp. v. Commissioner of Internal Revenue,
C.T.A. Case No. 7717, October 13, 2009
2. Once a return has been filed, the Commissioner or his duly authorized representative is
not precluded from examining the correctness of any return filed at their office.
The running of the prescriptive period to collect the tax shall be suspended for the period
during which the Commissioner of Internal Revenue is prohibited from beginning a
distraint or levy or instituting a proceeding in court, and for sixty (60) days thereafter.
Although a return may be modified or changed, within three (3) years from the date of filing of the
taxpayers return, as long as no notice for audit or investigation for such return, statement or
declaration has, in the meantime, been actually served upon the taxpayer, the withdrawal of any
previously filed return is not allowed under Paragraph 3, Section 6 of the NIRC of 1997.
While it has been held that when the BIR validly issues an assessment, within either the three-year
period or the ten-year period under Section 203 and 222 of the NIRC of 1997, respectively,
whichever is appropriate, it has another five (5) years after the assessment to collect the tax due
thereon through distraint, levy and/or court proceeding, the counting of the five year period may be
suspended under certain conditions. In this case, such period was suspended when the petitioner
filed the instant Petition for Review. Magnetic Resonance Imaging Services v. Commissioner
of Internal Revenue, C.T.A. Case No. 6608, October 20, 2009
3. To be considered an export sale, there must be present not only a sale, but also an actual
shipment of goods from the Philippines to a foreign country.
To be considered an export sale, there must be, not only a sale, but also an actual shipment of goods
from the Philippines to a foreign country. Thus, actual shipment of goods, to be considered as an
export sale for purposes of the application of the zero percent (0%) VAT rate, must be made also
in the quarter the sale was made.
After careful scrutiny of the documents presented supporting the input taxes on importations, only
those amounts duly substantiated which are attributable to its zero-rated sales were allowed by the
Court as proper subjects of a claim for refund or tax credit. Philex Mining Corporation v.
Commissioner of Internal Revenue, C.T.A. Case No. 7495, October 20, 2009
4. The refund/ tax credit of input VAT attributable to zero-rated or effectively zero-rated
sales shall be granted provided the following requisites are met:
1. There must be zero-rated or effectively zero rated sales;
2. That input taxes were incurred or paid;
3. That such input taxes are attributable to zero-rated sales or effectively zero-rated
sales;
4. That the input taxes were not applied against any output VAT liability; and
5. That the claim for refund was filed within the two-year prescriptive period.
Under Section 112(A) of the NIRC of 1997, the refund/ tax credit of unutilized input VAT is
premised on the existence of zero-rated or effectively zero-rated sales. Settled is the rule that a claim
for tax refund is in the nature of tax exemption, hence are construed in strictissimi juris against the
taxpayer and liberally in favor of the taxing authority. Petitioner has the burden of proof to establish
the factual basis of its claim, which it failed to do. Sitel Philippines Corp. v Commissioner of
Internal Revenue, C.T.A. Case No. 7423, October 21, 2009
5. Section 76 of the NIRC of 1997 provides that once a taxpayer chooses the option of carry-
over, it shall be irrevocable for that taxable period and no application for a tax refund or tax
credit certificate shall then be allowed.
Corporations and partnerships contemplating dissolution must notify the Commissioner
and shall not be dissolved until cleared of any tax liability.
As provided by the irrevocability rule, as long as the taxpayer had elected to carry-over said amount
to the succeeding taxable year, that choice is irrevocable for that taxable period. Petitioners 2005
Annual Income Tax Return (ITR) shows utilization of its 2004 excess creditable withholding taxes.
Despite amendment of its 2005 Annual ITR taking out the amount of claim from Prior Years
Excess Credits other than MCIT, petitioner is bound by the irrevocability rule thus precluding his
refund claim.
In the absence of a certificate of tax clearance, petitioner is not deemed dissolved but a continuing
corporation with its operations assumed to be carried on. Taken together with the irrevocability rule,
the creditable withholding taxes shall be considered carried-over and utilized from the year 2005
onwards, precluding petitioners claim. Philam Financial Advisory Services, Inc. v.
Commissioner of Internal Revenue, C.T.A. E.B. No. 463 (C.T.A. Case No. 7606), October 22, 2009
6. The right to appeal the decision of the Commissioner to the Court of Tax Appeals (CTA)
is merely a statutory remedy, nevertheless the requirement that it must be brought within
thirty (30) days is jurisdictional.
A request for reconsideration, as opposed to a request for reinvestigation, does not require the
submission by the taxpayer of additional or supporting evidence such that the sixty (60) day period
provided in Section 228 of the NIRC of 1997 is not applicable. Accordingly, the 180-day period
should be reckoned from the filing of the petitioner Royal Banks protest on January 28, 2004,
which lapsed on July 26, 2004. From July 26, 2004, petitioner had thirty (30) days or until August 25,
2004 to appeal the decision or inaction of the Commissioner to the CTA. As the petitioner filed its
Petition for Review on October 24, 2004 only, sixty (60) days beyond the reglementary period, the
assessment has already become final and executory. Royal Bank of Scotland (Philippines), Inc. v.
Commissioner of Internal Revenue, C.T.A. EB No. 446 ( C.T.A. Case No. 7089), October 23, 2009
7. Any VAT-registered person whose sales are zero-rated or effectively zero-rated may,
within two (2) years after the close of the taxable quarter when the sales were made, apply
for the issuance of a tax credit certificate or refund of creditable input tax due or paid
attributable to such sales, to the extent such input tax has not been applied against the
output tax.
The reckoning of the two-year prescriptive period for the filing of claim for VAT refund
starts from the date of filing of the corresponding quarterly VAT return.
Petitioner Toledo Power being principally engaged in the business of power generation, its sale of
generated power shall be value added tax zero-rated as provided by Republic Act 9136 (Electric
Power Industry Reform Act of 2001), provided the sales are properly substantiated. The earliest
quarter covered by the subject claim is the first quarter of 2004 for which petitioner filed its VAT
return on April 26, 2004 (April 25 being a Sunday). Counting from this date, petitioner had until
April 26, 2006 within which to file its claim administratively and judicially. Hence, petitioners
administrative claim filed on December 23, 2005 and the Petition for Review filed on April 24, 2006
are within the two-year prescriptive period. Toledo Power Company v. Commissioner of
Internal Revenue, C.T.A. Case No. 7471, October 23, 2009
(Note: The reckoning period of the two years to file a claim for refund may have been modified by a recent Supreme
Court decision.)
8. Taxpayers are not mandated to prove whether they had carried over their claimed excess
tax credits to the succeeding taxable years, as long as they have proven their entitlement to
the refund sought for the particular taxable year.
The Supreme Court has already ruled in the case of Philam Asset Management Inc. v. Commissioner of
Internal Revenue (477 SCRA 761, 773) that the succeeding returns need not be presented to determine
whether the claimed excess tax credits were not utilized in the succeeding years.
To be entitled to a claim for refund or issuance of a tax credit certificate of excess creditable
withholding tax at source, the taxpayer must prove the following:
1. That the claim for refund was filed within the two-year reglementary period, prescribed
under Section 204(C) in relation to Section 229 of the NIRC of 1997, as amended;
2. That the fact of withholding is established by a copy of the statement duly issued by the
payor (withholding agent) to the payee (BIR Form No. 1743-A), showing the amount
paid and the amount of tax withheld therefrom; and
3. That it is shown on the return of the recipient that the income payment received was
declared as part of the gross income declared in the income tax return of the recipient.
The petitioner in this case sufficiently complied with all three requisites but not for the entire
amount being claimed, which was reduced to the extent of creditable withholding taxes the related
income of which was not verified to be included in petitioners annual income tax return and those
which are not duly supported by valid proofs of withholding. Philippine Bank of
Communications v. Commissioner of Internal Revenue, C.T.A. Case No. 7435, October 29, 2009
9. Irrespective of the nature of the transaction, be it taxable, exempt or zero-rated sales, the
taxpayer shall issue VAT invoices pertaining to sales of goods, and official receipts as to
sales of services. Non-compliance results to a denial of the claim of refund or tax credit of
input tax.
Unutilized input VAT payments not otherwise used for any internal revenue tax due the
taxpayer must be claimed within two years reckoned from the close of the taxable quarter
when the relevant sales were made pertaining to the input VAT regardless of whether said
tax was paid or not.
The invoices or receipts shall contain information issued for the sale of goods and services by all
VAT registered persons. Non-compliance with the invoicing requirements results to a denial of a
claim for refund or tax credit of input tax on the purchase of goods and services pursuant to
Revenue Memorandum Circular No. 42-03.
A taxpayer may seek judicial redress for refund on excess or unutilized input VAT attributable to
zero-rated sales or effectively zero-rated sales with the Court of Tax Appeals either within thirty (30)
days from receipt of denial of the claim or after the lapse of the one hundred twenty (120) day
period in the event of inaction by the Commissioner; provided that both administrative and judicial
remedies are undertaken within the two (2) year period from the close of the taxable quarter when
the relevant sales were made. If the two year period is about to lapse, but the BIR has not yet acted
on the application for refund, a Petition for Review with the Court of Tax Appeals must be filed
within the two year period. Commissioner of Internal Revenue v. GST Philippines, Inc., C.T.A.
E.B. No. 484 (C.T.A. Case No. 7419), October 30, 2009
10. A protest denied in whole or in part, or not acted upon within one hundred eighty (180)
days from submission of documents, may be appealed by the taxpayer adversely affected to
the Court of Tax Appeals (CTA) within thirty (30) days from receipt of the decision or the
lapse of the 180-day period; otherwise the decision becomes final and executory.
On the question whether the appeal filed by respondent to the CTA was filed on time, respondent
received a copy of the Commissioners Final Decision on Disputed Assessment on February 22,
2005. From this date, respondent has a period of thirty (30) days or until March 24, 2005 to file his
appeal. Respondent filed his appeal to the CTA on March 22, 2005, well within the prescriptive
period. Commissioner of Internal Revenue v. Tropical Hut Food Market, Inc., C.T.A. E.B.
No. 488 (C.T.A. Case No. 7174), October 30, 2009.
11. There is erroneous payment of taxes when a taxpayer pays under a mistake of fact, such
as in the case where he is not aware of an existing exemption in his favour at the time
payment was made.
Clearly, Petron is the manufacturer or producer of the jet A-1 fuel liable to the payment of the excise
taxes before removal of the fuel from its place of production. Hence, Petron is the taxpayer
contemplated by Section 22(N) of the NIRC of 1997, the one with the legal obligation to pay the tax
and the proper person to claim for refund. PEAC failed to invoke its tax exemption against Petron
before buying the jet A-1 fuel, as such it is entitled to claim for refund not from respondent
Commissioner but only from Petron.
Petrons excise taxes paid on jet A-1 fuel sold and delivered to Pacific East Asia Cargo (PEAC), an
exempt entity, partakes the nature of erroneously or illegally collected taxes. It is refundable pursuant
to Section 229 of the NIRC of 1997, subject to the two-year prescriptive period reckoned from the
date of payment of the excise tax. Pacific East Asia Cargo Airlines, Inc. and Petron Corp. v.
Commissioner of Internal Revenue, C.T.A. Case No. 7668, November 5, 2009
12. Premium tax is deemed part of the cost of service for purposes of the Minimum
Corporate Income Tax (MCIT) but not the Documentary Stamp Tax (DST).
For the prohibition on non-retroactivity of any of the rulings or circulars promulgated by the
Commissioner to be operative, it must first be shown that there exists a prior or previous
ruling or circular that is the subject of revocation, modification or reversal of a subsequent
ruling or circular.
An increase in the coverage or the sum assured by an insurance policy is subject to DST,
although no new policy for such an increase is issued.
Section 27(E) of the NIRC of 1997 provides that for the purpose of imposing MCIT, cost of
services means all direct costs and expenses necessarily incurred by the taxpayer to provide the
services required by the customers and clients. Hence, the premium tax may be considered as a
direct cost and/or expense necessary to provide the service of insurance which are incurred by
insurance companies such as petitioner Manila Bankers Life Insurance Corp. to effectively issue
insurance policies. On the other hand, unlike the premium tax which is the direct liability of the
insurance company, the DST is imposed upon the person making, signing, issuing, accepting or
transferring the document or facility evidencing the transaction. Thus, the DST may be imposed
upon either party to the contract of insurance.
For the prohibition on non-retroactivity of any of the rulings or circulars promulgated by the
Commissioner to be operative, it must first be shown that there exists a prior or previous ruling or
circular that is the subject of revocation, modification or reversal of a subsequent ruling or
circular. In this case, petitioner failed to present evidence on the existence of such previous ruling or
circular.
Section 173 of the NIRC of 1997 provides that the payment of DST is done at the time the act is
done or transaction had and the tax base for the computation of the documentary stamp taxes on
life insurance policies under Section 183 is the amount insured by such policies. As the law does
not make any distinction, the amount insured should not be limited to the amount of the coverage
as written on the face of the policy but should also include increases that take effect after its
issuance, regardless of the reason for the said increases. Manila Bankers Life Insurance
Corporation v. Commissioner of Internal Revenue, C.T.A. Case Nos. 7266, 7378 and 7324,
November 6, 2009
13. Before forfeiture proceedings are instituted, the law requires the presence of probable
cause. Once established, the burden of proof is shifted to the claimant.
Probable cause having been shown in this case as misdeclaration constitutes prima facie evidence of
fraud, the burden of proof is shifted to petitioners. Unfortunately, petitioners failed to overcome
such presumption, as they only interposed the defense that they have no knowledge nor
participation as it was their broker who committed the misdeclaration. A consequence of this
representation entered into by the petitioners with the broker is the liability of the petitioners as
principals for the acts of its agent performed within the limits of its authority, or even in the case
when the agent exceeded its authority as when the principal allowed the agent to act as though he
had full powers.
Even granting that petitioners never participated in the misdeclaration of the goods, the
importations are still proper subjects of forfeiture by reason of misdeclaration as provided under
Section 2503 of the Tariff and Customs Code of the Philippines (TCCP) which automatically
forfeits the misdeclared imported articles.
Finally, the Court has already ruled that the forfeiture of seized goods in the Bureau of Customs
(BOC) is a proceeding against the goods and not against the owner. It is in legal contemplation the
property itself which commits the violation and is treated the offender, without reference
whatsoever to the character or conduct of the owner. Plastic Consumer Corp. and Polymaker
Corp. v. Commissioner of Customs, C.T.A. Case No.7139, November 6, 2009
14. In a merger, there is no liquidation of the assets of the dissolved corporations. The
surviving corporation assumes ipso jure the liabilities of the dissolved corporation,
regardless of whether the creditors have consented or not to such merger.
A Delegation Authority Order is merely an internal arrangement among the district offices
to expedite the processing of the administrative claim of refund by taxpayers, hence, it
should not be used to arbitrarily deny a valid claim for refund/ issuance of tax credit.
Clearly from the stipulations of the Plan of Merger, the transfers of real properties from absorbed
corporations CLI and CEVI to petitioner Stateland, Inc. were pursuant to an approved merger and
the Deed of Transfers of the said real properties were made in exchange for shares of stock of SLIC.
Therefore, there were no sales of real properties when CLI and CEVI executed the Deeds of
Transfers to petitioner as the same were made pursuant to a corporate merger wherein the
constituent corporations or the surviving corporations are not considered as buyer or purchaser in
the subject transfers. Consequently, petitioner is not liable for documentary stamp tax under Section
196 of the NIRC of 1997.
As to respondent Commissioners contention that petitioner erroneously filed the claim for refund
with the Office of the Commissioner, Bureau of Internal Revenue, National Office, instead of
Revenue District Office No. 30-Binondo, as required under Revenue Delegation Authority Order
No. 30-02 dated February 15, 2002 and as cited in BIR Ruling DA-083-03 dated March 17, 2003, the
same is not a ground to deny a valid claim for refund. The said Delegation Authority Order is an
internal arrangement among the district offices of the respondent to expedite the processing of the
administrative claim of refund by taxpayers. This, however, should not be used to arbitrarily deny a
valid claim for refund/ issuance of tax credit for an erroneous payment of tax. Stateland, Inc. v.
Commissioner of Internal Revenue, C.T.A. Case No. 7128, November 6, 2009
15. When a doctrine laid down by the Supreme Court is overruled, the new doctrine should
be applied prospectively and should not apply to parties who relied on the old doctrine and
who acted in good faith.
The prescriptive period applicable in the instant case is still the period enunciated in Atlas
Consolidated v. CIR (G.R. Nos. 141104 & 148763, June 8, 2007) where it was held that the counting of
the two-year prescriptive period for claiming refund or tax credit is reckoned from the filing of the
quarterly VAT returns. While it is true that in the recent case of Mirant Pagbilao Corp. v. CIR (G.R.
No. 172129, September 12, 2008), the Supreme Court had ruled that the claim for refund of unutilized
input VAT payments must be filed within two (2) years from the close of the taxable quarter when
the relevant sales were made, said ruling should be applied prospectively, in accordance with
numerous court rulings on this matter. The claim for refund of unutilized input VAT in this case
covers the second, third and fourth quarters of taxable year 2004, hence the Atlas ruling applies.
Commissioner of Internal Revenue v. Mindanao II Geothermal Partnership, E.B. Case No.
448 (C.T.A. Case No. 7507), November 11, 2009
16. The following requisites must be complied with to be entitled to a refund/ credit of
unutilized input VAT:
1. There must be zero-rated or effectively zero-rated sales;
2. Input taxes were incurred or paid;
3. Such input taxes are attributable to zero-rated sales or effectively zero-rated sales;
4. The input taxes were not applied against any output Vat liability during and in the
succeeding quarters; and
5. The claim for refund was filed within the two-year prescriptive period.
The second requisite was not completely complied with by petitioner Marubeni. The Court affirms
the Independent Certified Public Accountants (ICPA) report that per petitioners 2002 Quarterly
VAT returns, some of the amounts were not duly substantiated. Hence, its claim for refund or tax
credit was not allowed to such extent. Marubeni Philippines Corporation v. Commissioner of
Internal Revenue, C.T.A. Case No. 6898, November 11, 2009
17. The sale of electricity is zero-rated, pursuant to Section 6 of the Electric Power Industry
Reform Act of 2001 (EPIRA). However, a Certificate of Compliance (COC) must first be
obtained from the Energy Regulatory Commission (ERC) before the operation of a
generation facility to qualify for VAT zero-rating.
Pursuant to the requirements of the EPIRA, petitioner Toledo Power Company filed an application
for the issuance of a COC with the ERC, but it failed to submit proof of the approved COC. Thus,
its sales of generated power cannot qualify for VAT zero-rating under the EPIRA.
However, it has been consistently held that the National Power Corporation (NPC) is an entity with
a special charter, which exempts it from payment of all taxes, direct or indirect, including VAT. By
virtue of said charter, services rendered by a VAT-registered entity such as petitioner to NPC are
effectively subject to zero percent (0%) VAT, in accordance with Section 108(B)(3) of the NIRC of
1997, as amended. Toledo Power Company v. Commissioner of Internal Revenue, C.T.A. Case
No. 6961, November 11, 2009
18. As provided by Section 281(1) of the 1977 NIRC, as amended, the determining factor to
entitle an informer to a reward is that he gave information leading to the discovery of
frauds by internal revenue officers. It is sufficient that the person or entity concerned is
subject to, and violated revenue laws, and the informers report thereon resulted in the
recovery of revenues.
Based from the records of the case, it can be concluded that Confidential Information (CI) No. 45-
97 of petitioner Lihaylihay precipitated the investigation of Gemsteel, Inc. which resulted in the
recovery of taxes. The BIR itself admitted that it acted on CI 45-97 in a letter-reply stating that a
report on the information was already submitted by assigned revenue officers. Naturally, if Gemsteel
availed of the Voluntary Assessment Program (VAP) after investigations prompted by CI 45-97,
payment of taxes was eventually made and revenue inured to the government. Danilo Lihaylihay v.
Commissioner of Internal Revenue, C.T.A. Case No.7515, November 23, 2009
19. Claims for tax credit or refund of creditable taxes withheld shall be given due course only
when the following requisites are met:
1. That the fact of withholding is established by a copy of a statement duly issued by
the payor (withholding agent) to the payee, showing the amount paid and the
amount of tax withheld therefrom; and
2. That the income upon which the taxes were withheld were included in the return of
the recipient.
In case a corporation is entitled to a refund of the excess estimated quarterly income taxes
paid, the refundable amount shown on its final adjustment return may be credited against
the estimated quarterly income tax liabilities for the taxable quarters of the succeeding
taxable year.
It cannot be ascertained from petitioner Primetowns Monthly Remittance of Income Taxes
Withheld whether the taxes remitted pertain to the claimed creditable withholding taxes. Further, the
remittance returns were insufficient to establish that petitioner declared the income pertaining to the
claimed creditable withholding taxes on its uncancelled and cancelled sales transactions.
With respect to the refund of excess estimated quarterly income taxes paid, petitioner failed to
submit Quarterly Income Tax returns and Final Adjustment Return for the succeeding taxable years
to prove that the tax credits in 1997 which are being claimed for refund were not applied or utilized
in the taxable quarters of the succeeding taxable years. Primetown Property Group, Inc. v.
Commissioner of Internal Revenue, C.T.A. Case No. 6113, November 23, 2009
20. Unlike in corporate income tax, which is reported and paid on installment every quarter,
but is eventually subjected to a final adjustment at the end of the taxable year, VAT is
computed and paid on a purely quarterly basis without need for a final adjustment at the
end of the taxable year. Hence, each return has its own prescriptive period.
A false return is that which contains wrong information due to mistake, carelessness or
ignorance.
Perusal of the records, however, belied the findings of falsity. Thus, the three-year period and not
the ten-year period to assess does not apply. Clearly, since more than eight (8) years have passed
since the completion and turn-over of the Calaca II Project, the issuance of the assessment for
deficiency VAT against petitioner falls outside of the prescriptive period. Mitsubishi Corporation-
Manila Branch v. Commissioner of Internal Revenue, C.T.A. Case No. 7040, November 24, 2009
21. The Cross Border Doctrine under the VAT system essentially means that no value-
added tax shall form part of the cost components of products which are destined for
consumption outside the territorial border of the Philippines. This doctrine also finds
application to sales made by VAT registered suppliers to BOI-registered enterprises whose
manufactured products are 100% exported to foreign countries and therefore can likewise be
accorded automatic zero-rating treatment.
Petitioner Taganito Mining was issued a Certification by the Board of Investments (BOI), attesting
to the fact that petitioner is a BOI-registered entity with 100% exports. Under Section 3(4) of RMO
No. 9-00, said certification shall serve as authority for the local suppliers of petitioner to avail of the
benefits of zero-rating on their sales to petitioner, on the basis of which no output tax should be
shifted by the local suppliers to petitioner. However, there is absence of sufficient proof that
petitioners local suppliers did not avail of VAT zero-rating on their sales to petitioner, hence the
latter cannot claim input tax credits on its domestic purchases. Taganito Mining Corporation v.
Commissioner of Internal Revenue, C.T.A. Case No. 7428, November 24, 2009
22. In determining salaries as deductible expense of a taxpayer, paid to a taxpayers
supposedly employees, it is generally just to assume that reasonable and true compensation
is only such amount as would ordinarily be paid for like services by like enterprises in like
circumstances.
One of the requirements for the deductibility of an expense from the taxpayers gross
income is that the tax required to be deducted and withheld therefrom has been paid.
Simply put, the taxpayer must remit within the said period the tax withheld, otherwise the
corresponding expense may not be allowed as a deduction from gross income.
The Court notes that for the taxable year 1992, the claimed expenses for spouses Alderson,
Chairman and Vice-Chairman of petitioner Benjoys board, are almost four (4) times than that of its
President. With such difference, the salaries of the spouses Alderson are inordinately large, hence
should be reduced accordingly.
Section 58 of the NIRC of 1997 obliges the withholding agent to file the withholding tax return and
pay to the BIR the withheld tax at a certain period after the end of each month. In this case,
petitioner paid the supposed tax withheld only when respondent had made an assessment thereon,
which was beyond the required period. Thus, even if petitioner paid the deficiency expanded
withholding tax upon being assessed thereof, it shall not be allowed to deduct the subject expenses
or income payments to the pertinent withholding tax rates were applied. Benjoy, Inc. v.
Commissioner of Internal Revenue, C.T.A. Case No. 7597, November 25, 2009
23. Excise tax is imposed on the taxpayers privilege of severing or extracting minerals or
mineral products from the earth. Said tax is due and payable only upon removal of the
minerals or mineral products, or quarry resources from the locality where mined or
extracted.
Uncontroverted are the facts that petitioner Pacific Concrete was granted authority to extract, mine
and haul basalt found in Montalban, Rizal, and it supplied basalt for the construction and upgrading
of the Manila North Tollways. As petitioner was in possession of the basalt resources at the time of
removal from Montalban, it is therefore liable to pay the excise tax. This notwithstanding that
APAC, which granted authority to petitioner to undertake the said activities, had a contract with the
Government through a Mineral Production Sharing Agreement (MPSA) where it was stipulated that
APAC shall pay all other taxes and fees mandated by existing law, rules and regulations. Pacific
Concrete Products, Inc. v. Commissioner of Internal Revenue, C.T.A. Case No. 7408, November
25, 2009
24. Settled is the rule that in the refund or credit of internal revenue taxes, both the claim
with the BIR and the subsequent appeal to the Court of Tax Appeals must be filed within
the two-year period. These two requirements are mandatory and non-compliance therewith
would be fatal to the action for refund or tax credit.
Hence, the taxpayer must file its administrative claim for refund with the Commissioner, within two
(2) years after the payment of the tax; however, if the Commissioner takes time in deciding the claim
and the period of two (2) years is about to end, the suit or proceeding must be started in the Court
of Tax Appeals before the end of the two-year period, without awaiting the decision of the
Commissioner. As aptly ruled by the CTA First Division, the two-year period to file a claim for
refund of respondent Bankss unutilized creditable withholding taxes commences on the filing of the
adjustment return. Commissioner of Internal Revenue v. Philippine National Bank, C.T.A.
E.B. No. 499 (C.T.A. Case No. 7203), November 26, 2009
25. Nowhere is it required in Section 76 of the NIRC of 1997 that income tax returns for the
subsequent years are necessary to prove refund of excess creditable withholding taxes.
In the case at bar, although GADC presented its 2003 annual income tax return, the submission of
such document, including its 2003 quarterly income tax returns is not required as shown in recent
Supreme Court Decisions in the cases of State Land Investment Corp. v. CIR (G.R. No. 171956, January
18, 2008) and CIR v. PERF Realty Corporation (G.R. No. 163345, July 4, 2008), among others. As held
in these cases, the Tax Code requires the filing of the final adjustment return for the preceding- not
the succeeding- taxable year. The presentation of subsequent income tax returns is a mere
superfluity. Golden Arches Development Corporation v. Commissioner of Internal Revenue,
C.T.A. E.B. Case Nos. 465 & 470 (C.T.A. Case No. 7200), November 26, 2010
26. The ruling in the Mirant SC case that the reckoning of the two-year period should be
from the close of the taxable quarter should be applied prospectively, i.e. only to
administrative and judicial claims filed after September 12, 2008.
Judicial recourse within thirty (30) days after the lapse of the 120-day period provided in
Section 112(D) of the NIRC of 1997 is directory and permissive and not mandatory nor
jurisdictional as long as the said period is within the 2-year prescriptive period under Secs.
112 and 229 of the NIRC of 1997, as amended.
The rule that the reckoning of the two-year period is the date of filing of the quarterly tax return has
become a well-established doctrine and adopted in numerous SC decisions, until the case of Mirant v.
CIR on September 12, 2008. Consequently, the Mirant case should be applied prospectively and not
retroactively so as not to prejudice parties who relied in good faith on prevailing jurisprudence at the
time of filing of its judicial claim for refund.
It has also been held that if the two-year prescriptive period is about to expire, there is no need to
wait for the denial of the claim by the Commissioner of Internal Revenue or its inaction after the
expiration of the 120-day period before the taxpayer can lodge its appeal with the CTA. Moreover,
Revenue Memorandum Circular No. 49-03 dated August 15, 2003, recognizes that administrative
and judicial claims for VAT refund or tax credit can proceed simultaneously and that taxpayers need
not wait for the lapse of the subject 120-day period. Tem Sual Corporation [Formerly: Mirant
Sual Corporation] v. Commissioner of Internal Revenue, C.T.A. Case Nos. 7230 & 7299,
November 26, 2009